ISLAMABAD – Pakistan will start getting a deferred oil facility with SaudiArabia and UAE worth $6 billion likely to be started from January, it hasbeen reported.
The facility should be complete and ready for signature in January as arevised draft agreement has been sent to Riyadh, a well-placed source inthe finance ministry, while the talks with the UAE on the same facilityhave not yet yielded a draft agreement, however would be ready within fewweeks.
“We have almost finalised the details of the agreement with Saudi Arabia atthe technical level,” the source said, adding that the remaining issueswill be sorted out by the second week of January.
Once the draft has been agreed at the technical level, it will be signed bythe ministers of both countries.
The first meeting on the deal at the technical level was held in Islamabadin October.
As per proposed agreement, Pakistan will receive up to $3 billion worth ofoil with payment deferred for 365 days in the first year of the agreementin 2018.
The Saudi Fund for Development will act as a third party in the agreement.
Pakistan based refineries will place orders with Saudi Aramco, governmentowned company for supplying crude oil.
Pakistan has a long term contract with Aramco for supplying 110,000 barrelsper day (bpd).
Of these, Pak Arab Refinery Ltd (Parco) has a quota of 60,000bpd while theremaining quota of 50,000bpd is allocated to National Refinery Limited(NRL).
Both Parco and NRL will place orders for import with Aramco.
The Saudi Development Fund will pay in dollars to Aramco.
However, these refineries will deposit an equivalent amount in Pak rupeewith State Bank (SBP) here in Pakistan.
The SBP will begin repayments to the Saudi Development Fund 12 monthslater, with monthly payments.
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For example, the January 2019 payment will be made in January 2020.
This arrangement will be in place for a period of three years, with oilimports worth $9bn.
Saudi Arabia had earlier extended a similar special package to Pakistansoon after the nuclear tests of 1998, following which the country facedinternational sanctions.
Between 1998 and 2002, Pakistan received $3.5bn (Rs190bn at the exchangerate at that time) worth of oil from Saudi Arabia on deferred payment, amajor part of which was converted into grant and never repaid.
Deferred oil facility with UAE
According to the source, talks with UAE government are in an advanced stagefor a similar agreement of up to $3bn. The conditions attached to deal willbe similar to those agreed with Saudi Arabia.
Currently, Pakistan based refineries are importing crude and petroleumproducts from Abu Dhabi National Oil Company (ADNOC) under a long-termcontract.
The quantum of imports stands at 75,000bpd.
However, in case of extra demand, Pakistan can also import oil through opentender from UAE.
As per the agreed contract, Parco imports 39,000bpd crude oil, followed by29,000bpd by Pakistan Refinery Ltd and 6,500bpd by NRL.
According to the source, the UAE government has not yet nominated a thirdparty for the payment to Adnoc.
However, it is expected to finalise such an arrangement next month,according to the finance ministry official.
